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Indian central bank challenged in court to repatriate country's gold

Section: Daily Dispatches

RBI Gets High Court Notice to Explain Gold Deposits with Bank of England

By Dinesh Thite
Pune Mirror, Pune, India
Friday, May 4, 2012

A technocrat-turned-public interest litigant, Raghunath Shankar Kelkar, has challenged the Reserve Bank of India's move to deposit abroad 265.49 tonnes of gold out of its total stock of 557.75 tonnes by filing a public interest litigation in the Bombay High Court and has demanded that the precious metal be brought back into the country according to the provisions of the law.

Kelkar, 56, who used to manufacture computers, has filed the petition as he found that the move by the central bank contradicts Section 33(5) of Reserve Bank of India Act of 1934, which stipulates that 85 per cent of the bank's gold reserves should be kept in India.

The Bombay High Court bench, comprising D.D. Sinha and V.K. Tahilramani, heard the petition recently. The court noted that no one appeared for the RBI. The order stated, "Considering the issue involved in the present public interest lititation, we grant one opportunity to the RBI to put an appearance through its lawyer on the next day of hearing and assist the court."

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Kelkar filed the petition on March 1. He said that he had sent three notices of the issue to the RBI, eliciting no reply. He has made the Government of India another respondent in this case. Kelkar is an avid RBI watcher.

He read the 17th half yearly report of RBI on management of foreign exchange reserves, in which the bank has said, "The Reserve Bank held 557.75 tonnes of gold, forming about 9.2 per cent of the total foreign exchange reserves. Of these 265.49 tonnes are held abroad in deposits or safe custody with the Bank of England and the Bank for International Settlements."

He said that the RBI move was in violation of the legal provision as the bank had put 46 per cent of its gold reserves out of the country.

The reason given for the action is that of safe custody. "Does the RBI mean that gold is unsafe in India? Does the RBI think that Indian security forces are incapable of guarding the gold treasure of the country?" Kelkar asked.

He raised a question in the petition: "In case there is a war between India and England in future, will our gold held by Bank of England be safe?"

He has made three demands in the petition: that the RBI be ordered to transfer the gold reserves of the country from the possession of the Bank of England and Bank for International Settlements to its own possession within the country; that until the final disposal of the case, the bank not be allowed to take any more gold out of the country; and that a detailed report be filed as to which bank officers are responsible for the breach of Section 33(5) of RBI Act.

The price of gold deposited outside the country is about Rs 80,000 crore. Kelkar is pleading his case himself, instead of appointing a lawyer. Earlier, when he thought that the country had suffered a loss of more than Rs 65,000 crore due to alleged mistakes of RBI regarding its market stabilisation scheme, he filed public interest litigation in the High Court in 2008.

His argument was that RBI lost Rs 65,065 crore in 2006-07 due to a fall in its valuation of investments in foreign exchange. The RBI had not taken this loss to its profit and loss account and the central government was also not accounting this in its accounts presented to the Parliament, he said. The petition was dismissed in 2009 on technical grounds, Kelkar said.

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